- This topic has 1 reply, 2 voices, and was last updated 4 years ago by Chris.
Viewing 2 posts - 1 through 2 (of 2 total)
Viewing 2 posts - 1 through 2 (of 2 total)
- You must be logged in to reply to this topic.
Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>
Forums › ACCA Forums › ACCA FM Financial Management Forums › I am struggling with calculating the economic
I am struggling with calculating the economic ordering quantity for questions that have a discount percentage on the cost of the goods, as well as a percentage holding cost associated with the various costs. For example the following question:
Annual demand = 500
Order Cost = £30
Holding cost = annual rate of 20%
Pricing plan:
0-99 = £36
100-199 = £32
200-399 = £30
400+ = £28
How would the EOQ be calcualted for this question?
You need to solve the EOQ equation using the highest pruce and then calculate the total annual cost (annual demand * price + holding cost * average inventory). Then calculate the total annual cost of the quantities above that, using the lowest one. The option with the lowest annual cost is the best. E.g. if EOQ is 150, try 200 and 400.